The findings of a recent survey by DuPont Sustainable Solutions (DSS) show that executives are not adequately identifying and preparing for risks that can have potentially catastrophic implications on business operation.
“Old ways of looking at risk are insufficient in today’s global business environment if executives want their organisations to be sustainable and prosper,” said Davide Vassallo, global managing director of DuPont Sustainable Solutions.
“Running a successful business is more complex today than ever before, with executives facing numerous challenges on a daily basis both within and outside their organisations. With these challenges come numerous associated risks that executives must successfully anticipate and mitigate.In order to transform an organisation, executives should integrate risk into the organisation’s business strategy to engage employees, increase productivity and drive competitive advantage.”
The survery showed that while there is a general agreement and acknowledgement among executives of the important characteristics of a successful risk management programme, leaders are failing to implement those characteristics in their organisations. This failure is manifesting in the following ways:
(i) Executives are not placing sufficient emphasis on risks that can lead to large-scale incidents. Executives appear to be allowing low incident rates to give them a false sense of security and are not paying attention to other indicators of potential significant events. While 78% of survey participants agree that low incident rates do not correlate to reduced risk, two-thirds of executives nonetheless acknowledge feeling safe when they see data indicating incident rates are low, or trending to zero.
(ii) Executives address gaps in risk management processes by adding more processes. Executives participating in the survey agree that processes and systems alone are inadequate to manage risk and ensure operational performance. They agree on the importance of having systems in place to manage risks that are integrated, complement each other and are regularly reviewed for effectiveness. Yet 44% admit that gaps in existing systems present a challenge for their organisations.
(iii) Executives confirm disconnect among personnel in managing risk. One-quarter of surveyed executives feel front-line personnel are not aligned on top risks facing the company. More than half (55%) do not feel senior executives are fully aligned on top risks facing the organisation, which is an increase of 35% versus last year’s DSS survey, which is a general indication of a widening engagement gap between company leaders and front-line workers that prevents an organisation from effectively recognising and mitigating risks.
DSS’ annual global risk management survey of executives benchmarks and measures the maturity of operational risk management programmes in companies across numerous industries, and examines the challenges they face in effectively managing risk to improve business performance.
Executives from more than 350 companies participated in the survey, which was conducted between May and August 2018. One-half of survey participants (52%) were senior executives (CEO, CFO, etc.) and one-half (48%) were from the executive director level. Sixty percent of participating companies are in high-hazard industries such as mining and metals, oil and gas, and manufacturing. Roughly two-thirds of participating companies have a global presence. Forty-four percent are headquartered in North America, 27% in Asia-Pacific and 24% in Europe.